"Value and not volume will be driving digital," says Alon Bar-Shany of HP

27 October 2011

Digital

Vice president and general manager for Indigo presses Alon Bar-Shany speaks to Samir Lukka as HP looks forward to notch the 100 mark for Indigo in India this year.

Samir Lukka (SL): 100 installations for HP-Indigo in India?
Alon Bar-Shany (ABS): In India, we have reached 93 installations and hopefully later this year we will reach the 100 mark. We have Japan, China, Korea and Australia which have joined the club of hundred. Almost every year we have a country which joins the hundred club. India is definitely the next. It will be a significant milestone for us.

SL: Where does HP Indigo stand in the Indian market?
ABS: HP Indigo users in India are doing a broad range of applications. Some are doing photo, some are doing labels, flexible packaging, very high-end commercial printing for brochures etc. Today, there are about 35-40% (31) Indigo presses in the photo printing segment and about 15-20% (12) doing labels and flexible packaging. All other customers of Indigo are commercial offset printers who have gone digital. We are in an interesting category. We do not sell our presses to the small copy-shop quick printers and don’t see ourselves competing with the low end copiers. We would like to see ourselves compared more to the offset world because photo and wedding albums can’t be done on an offset press. The way InfoTrend measures the market, which is a comparison between Indigo, iGen, Nexpress, Xeikon, we have 90% market share in India. For Asia we have 75% market share.

SL: Software in digital is very critical. What is HP’s views?
ABS: For photos we have Taopix which is doing well. For packaging, the standard for Indigo is EskoArtwork. We sell EskoArtwork software products designed according to our specifications to complement our range of Indigo presses. They have created products that are suited for the Asian markets. Some of our customers have created local solutions by developing their own front-ends because India has good software capabilities. Regarding workflow in digital, first of all there is certainly no ‘standard’. Some people who come from the offset world use their Heidelberg and Agfa workflow and connect Indigo to it. We have customers who use sophisticated multimedia cross-media platforms like XmPie, or PageFlex and DirectSmile. Today, the printers are looking not only at putting ink on paper and sell it but at broader marketing capabilities. These systems enable you to do campaigns trough iPhone, email, text messages, personalised URLs. Printing is one part of it. The content has become more interactive than before.

SL: What about post-press for digital?
ABS: Printers in India have a range of finishing devices. Some are local, some are imported. We have global partners for finishing like Horizon, Duplo, Muller Martini but we don’t sell the machines, we just work with them. We will be happy to partner with a local manufacturer for local solutions.

SL: Data aids transpromo applications. Your comment?
ABS: Frankly in India, we haven’t had major success yet. We had it in Brazil though, which is similar to India in terms of large population and a strong GDP growth. For transpromo, you need the databases and the security of the databases. The more one can take information from banks, the credit cards and from where you spend your money, the more you can target. The challenge is managing this data. For this we work with companies like GMC but it’s still very early days in India.

SL: You drew a comparison of offset with Indigo. Then why the rigidness with the click model?
ABS: In the beginning we did not have click charges. Our customers are the ones who pushed us for the click charges. And it’s simple, because it’s predictable they know how much are they paying. On offset, a printer does a few jobs a day with longer runs. It becomes easy to calculate the break-even cost. In Indigo, a printer does 50 to 60 jobs a day. If you start calculating for every single job, it becomes too complicated. The customers came to us and asked: ‘Tell us how much to pay per page, don’t confuse us and we will do the calculations’. 11-12 years ago our customers were buying ink and other consumables. We offered them an option, either to buy all these or buy click. 99% Indigo users everywhere wanted click. So we are not forcing the click charge. If somebody in India thinks, they do not want the click charge, we can work with them. The complication for India versus other countries is that India has relatively high duties, so it makes everything more expensive than other places. This becomes a problem because India is very price sensitive. We charge less than the other countries and we live with lower profits because of our belief in the Indian market.

SL: Printers complain about the lack of service from HP’s partner, Redington, in India?
ABS: The issue to a certain extent with India is because of the customs and the duties when you want a part that is not in the country it takes a lot of time. Even in the USA, we don’t have 100% of the parts. We have some parts that we keep globally because they are used once in five years. When something like that happens the airplane leaves from Israel and the next day it arrives in the USA or Mumbai. The problem is it can get stuck in the customs for two weeks. When the part is not in the country, it always leaves Israel on the same day. But we cannot control the customs. We are adding more inventory in India but frankly it will never be 100%. Because we have thousands of parts and many different machines and some of the parts are old and discontinued. We will continue to invest more with Redington in India through joint investments and train our people a lot more. In some cases, we invest in spare parts at our customer site. So they don’t even need to call Redington. They can do it by themselves. Five years ago we were almost zero in India and today we have 93 machines. The more we grow, the better our services will be.

SL: How does a printer account for cost of electricity during the start-up time of HP Indigo?
ABS: The start-up time is important because the machine gradually checks the software. It checks if everything is in working order. The printer needs time to ensure that no paper is stuck inside – and that the atmosphere has cooled down to the prescribed temeperature, that the UPS is up and running. There are preventive costs which the printer has to identify and act accordingly.

SL: What is the cost of day to day operations? Users complaint that they experience a 10% to 40% increase in cost of service.
ABS: We charge for service, we charge for spare parts which are to be replaced, we charge for the software upgrades making sure that suppose if Adobe comes out with a new feature, Indigo can support it. These are the costs which are accounted for. I don’t think there are any invisible costs. Ultimately it will amount to how the printer handles the machine by using the authorised material, inks, trained operator, etc… and very importantly get insured.

SL: Is there a strategy for used HP machinery in India?
ABS: When I started looking at India ten to twelve years ago, I was told India is a great market for used machines. But when we tried to offer used machinery for the digital we found out that most of the Indian customers want brand new machines. We have machines that we call ‘R’ machines: R5000 and R5500 are the machines that have worked for three to five years and then we take them back to Israel and we totally rebuild. We sell them everywhere but in India there is very little demand because customers want everything new. I would love to send out the message that they are great machines, we are willing to send them at good prices and they are in perfect working condition. But most of the Indian printers say they will pay another hundred thousand dollars extra and demand the "latest and greatest". We have very few used machinery customers in India.

SL: In India, analogue printing still accounts for 99% of print volume. In this sense, when will digital overtake analogue?
ABS: In terms of number of pages or print volume, I don’t think digital in the next decade will come close to analogue. In terms of value, it will happen. The reason is, very long runs will be printed on offset, flexo etc and will be sold for very little money. The mid-runs will be printed on digital. I think the crossover point, ie when will it be 50-50, depends on the application. It will happen first in labels then brochures and books. But we are not looking at reaching parity on volume, we are looking to reach parity on value. If you talk to most Indigo customers today, they will usually tell you that digital is 30% of their revenue, it’s over 50% of their profits and growing at 20-30% annually whereas their analogue side is declining. They still have offset presses doing long runs because the print buyer wants both. And the printer does not want to be position himself as only a digital printer. A digital machine amplifies his profile towards the print buyer to whom he can provide five copies, 500, 5000 or 50,000 copies. Because what he wants the print buyer to do is to order ten copies of 1,000 each. That is what the printers are looking at today. They are not just counting pages. They are looking at money and profits.

SL: Are speeds of 98 feet per minute (30 mtrs/min) in four-colour mode, adequate to match the flexo presses for labels?
ABS: More than the speed the USP of a digital printing press is the flexibility combined with a short set-up time because there are no plates to create and no film to output. On the global scenario what we are seeing is that more and more of our customers are having four to five Indigo presses for labels although they have flexo with web. Flexo has its own limitations. With digital printing on Indigo, you can print 1,000 custom labels and every label can contain different data as well as provide the flexibility for "Gang running" (a term that refers to the ability to combine several different designs into a single printing press job).

SL: What is the future of toner technology?
ABS: Toner has been around for decades. It’s a great technology and probably suited for smaller volumes. If you want to print ten to twenty thousand impression of pages per month it is a good solution. It’s relatively small, easy to operate. So I think Xerox, Ricoh, Canon have been very successful with smaller shops doing smaller jobs with smaller quanity. You have offset doing big quanity and toner doing small quantity. I don’t think the technology will disappear but it will remain where it is now. Monochrome is going down, colour in digital is stabilising, offset is going down and inkjet will take over offset volumes.

SL: What is your take on Kodak’s Stream technology?
ABS: Stream technology which Kodak came with in 2008 is very interesting. Kodak is a public listed company and everybody knows what they are doing and how they are doing. Kodak’s share prices have gone down 90% in the last five years. That speaks for itself. It is a good technology but let’s put it this way, HP has sold more T300 web presses than Kodak has sold Prosper colour presses.

SL: Canon-Oce, Heidelberg-Ricoh, and now, HP + who?
ABS: Heidelberg ignored digital for years and is now trying
to get back into the game. Canon, very good company but
Oce is not doing well. I think HP is larger than any of these. We have partners in workflow, finishing and country partners like Redington in India. I don’t think we are looking for any offset partner.